Question 1

Georgia Power and Philadelphia Gas Works are two examples of firms in what type of industry structure?
A) monopolistic competition
B) regulated monopoly
C) natural monopoly
D) oligopoly

Accepted Answer

These firms represent a natural monopoly. This is created when the government believes the product or service would not be supplied by the market if it was not a monopoly.

Question 2

The level of entry barriers is only relevant to potential competitors because:
A) Firms that are established in an industry have already overcome the barriers to entry.
B) The existence of high entry barriers has little impact on overall industry profitability.
C) Competitive markets are dynamic, so established firms expect that there will always be new entrants.
D) The level of entry barriers is relevant to both existing and potential firms due to the competitive consequences for both.

Accepted Answer

High entry barriers correspond to high industry and firm profitability. The number of new entrants into an industry has significant competitive implications for existing firms. Entrants are concerned with how difficult it will be to enter an industry.

Question 3

When there is pressure to innovate,advertising is key and improved service is important for competition,competitors are engaging in ______________ and prices will ________.
A) price competition; be higher
B) perfect competition; be higher
C) non-price competition; be higher
D) perfect competition: be lower

Accepted Answer

In non-price competition, firms use tactics such as advertising, offering services, and innovation to compete instead of on the basis of price. Therefore, they can charge higher prices.

Question 4

An industry with three firms and a differentiated product is most likely a(n)________,while an industry with three thousand firms and a differentiated product is most likely a(n)________ industry.
A) perfect competition; oligopolistic
B) monopoly; perfectly competitive
C) oligopoly; monopolistic competitive
D) oligopoly; perfectly competitive

Accepted Answer

A monopoly exists when there is one large firm supplying the market. Perfectly competitive industries generally do not have differentiated products. So the correct answer here is an oligopoly has three firms and a monopolistic competitive industry has many firms but differentiated products.

Question 5

Competition by offering unique product or service features rather than competing on price is called what?
A) Monopolistic competition
B) Differentiated competition
C) Non-price competition
D) High-intensity competition

Accepted Answer

Non-price competition is competing by offering unique product or service features rather than competing on price.

Question 6

The objective of Porter's five forces model is to:
A) Assess firm profitability.
B) Assess the potential for profits within an industry.
C) Emphasize the intensity of rivalry within an industry.
D) Analyze the economic conditions of the industry.

Accepted Answer

Applying the five forces analysis to an industry helps to determine competitive intensity and attractiveness of an industry, which reflects profit potential.

Question 7

A ____________ is created when the government believes the product or service would not be supplied by the market under free market conditions.
A) monopolistic competition
B) regulated monopoly
C) near monopoly
D) natural monopoly

Accepted Answer

A natural monopoly is created when the government believes the product or service (such as utilities) would not be supplied by the market if it were not a monopoly.

Question 8

A key feature of an oligopoly is that the firms are interdependent,which allows them to be good examples in game theory.What does it mean when firms are interdependent?
A) The actions of one competitor influences the behavior of the others.
B) The competitors take actions according to their own situation.
C) The competitive landscape is brutal and will likely have low profits.
D) There will be a dominant solution available in the market.

Accepted Answer

Interdependence means that the actions of one competitor influence the behavior of the others.

Question 9

When firms that provide key raw materials to an industry can frequently negotiate for higher prices,the:
A) Bargaining power of buyers is high.
B) Bargaining power of suppliers is high.
C) Barriers to entry are low.
D) Bargaining power of suppliers is low.

Accepted Answer

Suppliers who have high bargaining power are able to negotiate for high prices.

Question 10

When a supplier has a credible threat of forward integration,what happens to their power in the industry?
A) It decreases.
B) It has no impact.
C) It converges.
D) It increases.

Accepted Answer

A credible threat of forward integration increases supplier power.

Question 11

If a rival makes a strategic move in a(n)_________ industry,the dominant firm is most likely to respond with its own initiative to counter (or coordinate)the effects of the first firm.
A) monopolistic competitive
B) oligopolistic
C) monopolistic
D) perfectly competitive

Accepted Answer

In an oligopolistic industry, the few large rivals are interdependent and respond to each other's moves as in a game of chess.

Question 12

What is BYD using to avoid entry barriers upon entering the automotive industry?
A) They purchased a major automotive company.
B) They reduced the switching costs of moving to electric vehicles.
C) They used proprietary battery technology for use in electric vehicles.
D) They have an established brand in China.

Accepted Answer

BYD started as a battery company and they are using their own batteries in their electric vehicles.

Question 13

Suppliers are powerful when which of the following happens?
A) Satisfactory substitutes are available.
B) They sell a commodity.
C) They offer a credible threat of forward integration.
D) They are part of a highly fragmented industry.

Accepted Answer

A credible threat of forward integration increases supplier power.

Question 14

As natural monopolies are shrinking due to global governmental privatizations,another competitive landscape is emerging.Firms like Intel that have 80 percent market share in some markets would be called what?
A) Competitive monopoly
B) Regulated monopoly
C) Near monopoly
D) Natural monopoly

Accepted Answer

A near monopoly is created when the firm has accrued significant market power by product differentiation and is changing the industry structure in their favor.

Question 15

When a buyer has a credible threat of backward integration,what happens to their power in the industry?
A) It decreases.
B) It increases.
C) It converges.
D) It has no impact.

Accepted Answer

A credible threat of backward integration increases buyer power.

Question 16

The United Auto Workers (UAW)union is which of the five forces in the automotive industry?
A) A supplier
B) A buyer
C) A complement
D) A substitute

Accepted Answer

UAW is a powerful supplier to the traditional U.S. auto industry.

Question 17

A firm can use its knowledge of the five forces to strengthen its competitive position through ___________.
A) product differentiation
B) leveraging complements
C) backward integrating to reduce supplier power
D) All of these

Accepted Answer

Firms that are able to differentiate a product have a degree of pricing power, complements add value to a product and backward integrating removes supplier power.

Question 18

One of the consequences of the five forces analysis is that a firm must ask itself what?
A) Is the company in a strategic group?
B) Does the company strategy match the competitive landscape?
C) Is the company in an oligopoly or monopolistic competition?
D) Is the company engaged in co-opetition?

Accepted Answer

The five forces model is the one used when managers need to analyze the industry environmental forces when formulating strategy.

Question 19

Which of the following is NOT one of Porter's five forces?
A) Substitutes
B) Suppliers
C) Complements
D) Buyers

Accepted Answer

Complements is added as a sixth force for industry attractiveness, but Porter's model does not include it.

Question 20

An ideal competitive environment from a profit-making standpoint is when:
A) Rivalry is moderate, and high entry barriers and good substitutes do not exist.
B) Rivalry is high, entry barriers are low, and there are many substitutes.
C) Rivalry is high, buyers and sellers have strong bargaining power, and entry barriers are low.
D) Rivalry is moderate, entry and exit barriers are low, and there are many substitutes.

Accepted Answer

Profitability is weakened when barriers to exit and entry are low, buyers and sellers have strong bargaining power, and there exist many substitutes.

Quiz 3: External Analysis: Industry Structure, Competitive Forces, and Strategic Groups

Georgia Power and Philadelphia Gas Works are two examples of firms in what type of industry structure?

The level of entry barriers is only relevant to potential competitors because:

When there is pressure to innovate,advertising is key and improved service is important for competition,competitors are engaging in ______ and prices will .

An industry with three firms and a differentiated product is most likely a(n) ,while an industry with three thousand firms and a differentiated product is most likely a(n) industry.

Competition by offering unique product or service features rather than competing on price is called what?

The objective of Porter's five forces model is to:

A ____________ is created when the government believes the product or service would not be supplied by the market under free market conditions.

A key feature of an oligopoly is that the firms are interdependent,which allows them to be good examples in game theory.What does it mean when firms are interdependent?

When firms that provide key raw materials to an industry can frequently negotiate for higher prices,the:

When a supplier has a credible threat of forward integration,what happens to their power in the industry?

If a rival makes a strategic move in a(n) _________ industry,the dominant firm is most likely to respond with its own initiative to counter (or coordinate) the effects of the first firm.

What is BYD using to avoid entry barriers upon entering the automotive industry?

Suppliers are powerful when which of the following happens?

As natural monopolies are shrinking due to global governmental privatizations,another competitive landscape is emerging.Firms like Intel that have 80 percent market share in some markets would be called what?

When a buyer has a credible threat of backward integration,what happens to their power in the industry?

The United Auto Workers (UAW) union is which of the five forces in the automotive industry?

A firm can use its knowledge of the five forces to strengthen its competitive position through ___________.

One of the consequences of the five forces analysis is that a firm must ask itself what?

Which of the following is NOT one of Porter's five forces?

An ideal competitive environment from a profit-making standpoint is when: